Micro Focus shares drop on update

Micro Focus shares lost a quarter of their value yesterday as the software company warned markets it was unlikely to hit sales or profit targets for the year.

Interim results for the six months to 31 October 2010 showed profits and turnover were lower than expected, although the company has cut debt. Micro Focus shares fell from 400p to under 300p yesterday, and they're up about two per cent this morning.

Management have already acted to sort the problems out and said better integration of recent acquisitions like Borland and Compuware's testing division would increase efficiencies. Debt fell to $5.5m in January compared to $40.4m at the end of October 2010.

It said it would invest more in its Cobol development business where it sees strong chances of growth.

But Micro Focus also warned there were other areas where it would be cutting investment or even selling off divisions.

Micro Focus is taking a charge of between $14m and $18m to pay for the restructuring.

The company said it was unlikely to make up for the shortfall in revenue in the last three months of the year. It expects sales of between $432m and $442m for the full year.

But because most of the revenue shortfall is in high margin licence fee and maintenance contracts, it expects adjusted profits to be between $141m and $153m once the restructuring charge has been deducted.